Tuesday, April 24, 2012

UPDATE: Ultra blocks progress on SDS pipeline

Looks like things might work out without the city getting tough with Ultra Resources to gain access to 8,300 acres of Ultra land.

Doug Selvius, vice president of exploration for Ultra Resources' parent Ultra Petroleum, says the company is working with the city to reach some kind of agreeable plan, hopefully by Thursday.

"We should have all of our issues, which are relatively minor, ironed out by then," he says in an e-mail.

And, shame on us, we were wrong about this acreage not being in the city. All six parcels at issue lie within the city limits, assessor records show. The land is taxed as agricultural land based on usage of the property, regardless of how it's zoned. In this case, the land that's part of the Banning Lewis Ranch on the city's eastern side is zoned under a master plan that contains a mix of residential and commercial zoning.

————— ORIGINAL POST MONDAY, APRIL 23, 2:27 P.M. —————

Pueblo Dam

The city is already in court with Ultra Resources over the annexation agreement for Banning Lewis Ranch, a good portion of which Ultra bought last year as an oil-drilling play.

Now, the city is getting ready to take the Houston company to court on something entirely different.

Ultra Resources has refused to allow Colorado Springs Utilities access to roughly 8,300 acres it owns east and southeast of Colorado Springs so engineers can design the Southern Delivery System pipeline that will bring water from Pueblo Dam. Those acres apparently lie in the path of the pipeline and its components.

Tomorrow, City Council is set to give Utilities approval to seek "court intervention" to gain access to the land in order to "design and permit a portion of the Southern Delivery System (SDS) pipeline," Utilities CEO Jerry Forte says in an memo to City Councilors, who sit as the Utility Board.

The properties, which are outside Springs city limits (see above), are described as grazing land and are zoned agriculture, according to the El Paso County Assessor's Office. Ultra acquired 18,000 acres on the city's east side last year to drill for oil. The city has a drilling moratorium in place until the end of next month as the city attempts to write oil and gas drilling regulations.

Forte also says in his memo:

All six properties are owned by one entity and they have been notified a number of times over the last six months via phone calls, email, letters and in-person meetings that SDS needs access to the properties to gather critical data required for advancing design and permitting for components of the SDS project. The access agreement does not allow SDS to install permanent improvements on the property. The majority of hte [sic] access activities will be confined to the surface of the land and any limited sub-surface disturbance will be restored to its previous condition, or better.

To date, the property owner's representative has stated that they do not wish to hinder the progress of SDS, but have not granted access to the necessary properties thus far. The owner's representative has not provided justification for the delay in allowing access. Additionally, staff has communicated to the property owner's representative that we are open to negotiate on the language contained in the standard SDS Right of Entry agreement to meet their criteria, yet we have not received proposed changes to the language to date.

Here's one parcel at issue, 3,138 acres, in a squabble between Ultra Resources and Springs Utilities.

"We are in ongoing discussions with them and our hope is that we can get to agreement on it," Utilities spokeswoman Janet Rummel says. "All we're asking is for access so we can do geotechnical work." Utilities wants to locate part of the pipeline and the northernmost pump station on Ultra land, she says.

"Once you get to a certain point, it starts to cost money," she says of delays caused by Ultra's refusal to cooperate. "We're just trying to have that option to take this to court if needed, but again, we're hopeful we'll reach agreement with them. We've even offered that they can adjust the language in our standard agreement. We're willing to work with them in putting any more specific language in the agreement that would make them more comfortable and make sure we're not impacting their operations with anything we're trying to do."

The hassle in bankruptcy court over the annexation agreement pits Ultra, which wants the agreement set aside so the property could be rezoned agriculture to allow drilling, against the city, which wants to keep the master plan for homes and businesses in place.

Utilities has been consistently successful in court over acquisition of land for SDS. If Utilities has hit a snag over merely entering Ultra's property for design and engineering purposes, imagine the fight if the city has to condemn Ultra property. Condemnation is a public taking of private property for a public purpose. Any attempt to acquire land would come later, Rummel says.